Down To Earth

Editorial. Sunita Narain.
XVIII.VII.XV

Metamorphosis of mining
policy

In India,
policy often becomes dead on
arrival

By Sunita
Narain

There is a
science and art of policy-making. In India, this
is confounding and abstract. But what stands out
is that the intent and form of policy-making
begins somewhere and ends somewhere else—as
it moves between desks, competing interests and
even governments, it evolves or gets distorted so
that the final product looks very different. But
that is not the end of the matter. By the time a
policy is decreed into law, the original
proponents become cynical or lose interest in its
implementation. Policy then becomes dead on
arrival.

Let me explain
why I am saying this.

In the mid-2000, mining
was the sunshine sector. India was digging for
minerals like there was no tomorrow. The
government set up a committee under the then
member of the Planning Commission, Anwarul Hoda,
to suggest changes in the mining policy. This was
also the time when we at the Centre for Science
and Environment (CSE) were researching this
sector. The Hoda committee focused primarily on
mineral extraction. Our focus was the
interconnection between mineral wealth, forests
and water—also found where minerals are
found—and the fact that people who lived in
these rich lands were the country’s
poorest.

In 2007, another
committee was formed, this time under the then
home minister Shivraj Patil to examine the Hoda
report recommendations. We pushed our way into
this committee, making a presentation on the need
to reform the 1957 Mines and Minerals (Development
and Regulation) Act, or MMDR Act, to account for
environmental safeguards and share revenues with
local people.

Then in 2009, the Union
Ministry of Mines, headed by an extraordinary
bureaucrat, began rewriting the 1957 law. The
first draft of the revised MMDR Act decided to
make people partners in mining operations by
giving them equity in mining companies. But the
very idea of sharing benefits with people was too
much for mining companies. The Federation of
Indian Mineral Industries went as far to say that
if money was given then “tribal men would
drink and beat their
wives”.

But better sense
prevailed. It was decided that instead of equity,
companies would give 26 per cent of their profits,
which would be channelised directly into the
accounts of the affected people. As I said,
policy-making in India is confounding, so meeting
after meeting was held to evolve consensus and
each time it was an effort to keep the
benefit-sharing provision
intact.

By the time MMDR Bill,
2011, was tabled in Parliament, the original idea
remained but in a different form. Instead of
sharing profits, it was decided that mining
companies other than coal would give equivalent
royalty to the district mineral foundation; coal
would give 26 per cent of the profits after tax.
The law made it clear that this money was to go to
the affected people. However, UPA II did not push
for this bill and after two years as Parliament
dissolved it lapsed.

The new NDA government
instead of rewriting the 1957 Act, brought in an
amendment, mostly to move to auction of mines for
greater revenue and transparency in allocation. In
this amendment, now passed by Parliament, the
provision on benefit sharing remains, but it has
lost its intent. Now the district mineral
foundation (DMF) is to be set up in all areas
“affected by mining related
operations”.

Holders of mining leases
will pay to the foundation of the district in
which mining is done a sum, “which will not
exceed one-third of the royalty” in the case
of new leases and “equivalent to the
royalty” in case of old leases. The
amendment lets state governments set the rules for
the foundation, including its composition. But it
does say that the object of this foundation will
be to work for the “interests and benefits
of persons and areas affected by mining related
operations.”

My colleagues have
calculated that DMFs in big mining districts will
get substantial inflows of funds. At current
royalty rates districts like Keonjhar would get
some Rs 600 crore annually. It is possible to use
this money for the direct benefit of the affected
people as well as to invest in their future
assets. Now the question is who will make the
rules to ensure that the money reaches where it
belongs?

By now the original
proposal is long gone. However, in this case, CSE
as the proponent of the idea remains. The first
draft of dmf rules, from Rajasthan, focuses on the
use of money. It has no idea that this provision
was meant to give people a stake in the rent on
natural resources. It was meant to profit them so
that it leads to inclusive growth. In the great
Indian policy bazaar the challenge is to ensure
that even this not-so-great policy is used as per
its original intention and to find ways to
implement it so that it can do what is was meant
to do: bring change in the lives of the
poor.